Higgins v. Hampshire Products, Inc.

30 N.W.2d 390, 319 Mich. 674, 175 A.L.R. 1083, 1948 Mich. LEXIS 629

• Court: Michigan Supreme Court
• Decided: January 5, 1948
• Docket: Docket No. 48, Calendar No. 43,851.
• Status: Published

Opinions

Butzel, J.

This suit was properly brought in Washtenaw county. The village of Milan is situated partly in Monroe county and partly in Washtenaw county. Defendants claim that it is common knowledge at least in Milan, Michigan, that the street address of defendant Hampshire Products, Inc., as well as the location of its office, is in Monroe county, and that it is inconceivable that plaintiffs after doing business with defendants for many months did not have this knowledge. †‡*Our attention has not been called to any law or custom by which a county line can be determined by a careful observer in the absence of a sign designating it, and there is no claim that there was such a sign. The only safe and ■ proper thing for an investigator to do is to go to the county records. That is exactly what the plaintiffs did. The articles of association of defendant, its certificate of registered agent and its annual reports regularly filed'up to and including the year 1946 stated that its place of doing business and offices are in Washtenaw county. It is not claimed that Monroe county is even mentioned. The articles of association were never amended or filed in Monroe county. A short time prior to the commencement of this suit, plaintiffs had brought another suit in Washtenaw county against Hampshire Products, Inc., to recover on what plaintiffs claim was an entirely different cause of action, and in that suit de-i fendant did not assert that the venue was improper. The testimony showing that Hampshire Products, Inc., was located in Monroe county is not strong. The court relied on the fact that the company paid personal property taxes in Milan township, which is in Monroe county. The record makes it uncertain whether it did this more than once. The deputy sheriff who served the declaration stated fiat he did not know whether the company’s building was in Washtenaw county or not, but that the line goes through Milan and the building is located very close to the line. Plaintiffs, however, made no showing to refute the claim that the defendant’s property was not situated in Washtenaw county except to offer the records and files of the county clerk of Washtenaw county and to show the additional fact that no certificate was filed in Monroe county. The judge on this tenuous testimony on the part of defendant Hampshire Products, Inc., found under the circumstances that Hampshire Products, Inc., was located in Monroe county.

Numerous decisions hold that the purpose of the requirement that the articles of incorporation and annual report be made a public record is to provide a means of furnishing information to those who deal with corporations and that those so dealing have a right to rely upon the fairness and honesty of statements made therein. Silberman v. Munroe, 104 Mich. 352; Bank of Saginaw v. Pierson, 112 Mich. 410; Dime Savings Bank v. Fletcher, 158 Mich. 162 (35 L. R. A. [N. S.] 858); Continental & Commercial National Bank v. Emery, 178 Mich. 612; Ver Wys v. Vander Mey, 206 Mich. 499. Although these cases refer to the right to rely upon statements regarding the financial condition of a corporation, the same reasoning should apply with respect to other statements contained in the records.

The purpose of the requirement that the location and postoffice address of the corporation^ specified , in the articles and the annual reports is, among others, to fix the location or residence of the corporation under venue statutes. 1 Fletcher, Cyclopedia, Corporations (Perm. Ed.), § 140. In section 4046, of the same'work, the rule is again stated:

“Such requirements are written into the statutes fin order to secure service of process, determine •venue, for purposes of general jurisdiction and taxation. ’5

Many cases are cited. We find these among others to be directly in point: State, ex rel. Juvenile Shoe Corp., v. Miller, 217 Mo. App. 16 (272 S. W. 1066); Alabama Clay' Products Co. v. City of Birmingham, 226 Ala. 631 (148 South. 328) ; State, ex rel. Northwestern Land & Colonisation Co., v. District Court of Winnebago County, 191 Iowa, 244 (182 N. W. 211). In a fairly recent case, Haivk & Buck Co., Inc., v. Cassidy, 164 S. W. (2d) 245, the Texas Court of Civil Appeals said:.

“Like many other jurisdictions, Texas has by statute required corporations to designate the place or places where they will do business. * * *. Such statutes are, no doubt, for the obvious purpose of avoiding disputes as to the company’s ‘place of business’ or ‘domicile’ and to determine venue,” et cetera.

It is the usual practice of attorneys in selecting a court of competent jurisdiction for the bringing of a suit to check the records on file in the county clerk’s office. Plaintiffs followed this practice in this case and the public records revealed that defendant resided in Washtenaw county. Are we to say that plaintiffs had no right to rely upon these records, which are composed of documents which we assume have been properly executed and verified by defendant? By asserting that it is not a resident of Washtenaw county, defendant seeks to set up its violation of the statute by failing to file true annual reports as a shield from an otherwise proper suit.

. We feel that the basic question involved in this appeal is the following: Does the designation of Washtenaw county in the articles make defendant a “resident” of Washtenaw county, at least for purposes of venue, under 3 Comp. Laws 1929, § 13997‡ par. 2, as amended by Act No. 225, Pub. Acts 1931 (Comp. Laws Supp. 1940, § 13997, Stat. Ann. § 27.641), even though, in fact, its principal and only office is in Monroe county? This question must be answered in the affirmative if we are to give effect to the legislative intent behind the statutes regulating articles, of association, annual reports, et cetera, of corporations.

We must acknowledge that the authorities are in conflict upon this question. The text-writers have the following to say:

8 Fletcher, Cyclopedia Corporations (Perm. Ed.), §4035:

“Domestic, corporations * * * are * * * deemed to have, equally with natural persons, a residence at some place in the State, and that place is generally regarded as being the one at which the principal office or principal place of business is located, or where its books • are kept aid its corporate business is transacted. * * * Thus, it has been held that a domestic corporation has its residence for purposes of venue in the county designated in its certificate of incorporation as that in which its principal place of business was to be located, notwithstanding the fact that it actually has places qf business in one or more other counties, although it has been held that statements in its certificate or charter as to the location of its principal place of business are not at all conclusive. ’ ’

And in section 4046, the same author says:

“The courts are not agreed upon the question as to whether the statement in the articles of incorporation Regarding the location of the principal office or place of business is or is not conclusive. According to the weight of authority such statement is not conclusive. ’ ’

In 18 C. J. S. p. 585, Corporations, § 176, the following language appears:

‘ ‘ By some authorities, the charter, articles, or certificate is regarded as conclusive as to domicile or residence, although the company may in fact transact some or even the greater part of its business elsewhere; but according to other authority, at least as to the State and persons not parties to the designation of the principal place of business, residence, or domicile is not conclusively determined by the charter, articles or certificate, but is a question of fact. ’ ’

We have made a very thorough, though not exhaustive, examination of the cases cited in support of these rules. We find that in the cases which were in point on the issue herein involved the courts have been uniform in holding, in effect, that a corporation can be sued in transitory actions in the county designated'in its certificate to be the location of its principal office, i.e., that a corporation is a resident of such, county for purposes of venue. From them the rule can be deduced that although the designation in the certificate of incorporation is not absolutely “conclusive” so as to bind all persons, it is nevertheless conclusive as to the corporation where a question of venue is involved.

In Hawk & Buck Co., Inc., v. Cassidy, supra, a case which on its facts is practically identical with the instant case, the court said:

“We feel compelled to follow the rule * * * that a corporation may be sued in the county where its domicile is designated by its charter, and this regardless of whether it does business or maintains an office in such county. In this decision, however, we do not wish to be understood as holding that the provisions of the charter fix the venue exclusively' in Dallas county. The principal office of the corporation is admittedly in Tarrant county and thus venue against it might also be there under * * * (the statute). The conclusiveness of the recitations in the charter must necessarily be construed against the corporation and not in its favor so as to permit. it to remove a suit from the county of its actual residence to one designated in its charter. ’ ’

An accurate statement of the rule in the State of New York is contained in Gorman v. A. B. Leach & Co., Inc., 11 Fed. (2d) 454, where the court quotes from People, ex rel. Knickerbocker Press, v. Barker, 87 Hun 341 (34 N. Y. Supp. 269) (affirmed without opinion, 147 N. Y. 715 [42 N. E. 725]), as follows:

“The policy of this State is"to require corporations organized under, its laws to have a fixed residence or domicile which is deemed to be where it has its principal office or principal place of business. * * * In case the statute under which a corporation is organized requires that its principal place of business, or its principal office, be designated in its certificate of organization, the' statement is as against the corporation conclusive evidence bf its residence, unless its residence lias been changed pursuant to some statute.” (Italics oúrs.)

In State, ex rel. Northwestern Land & Colonization Co., v. District Court of Winnebago County, supra, suit for appointment of a receiver was instituted in the county designated in defendant corporation’s charter to be its- principal place of business. The defendant contended that- its residence was in another county where it carried on its business and that it had no property or office in the county in which suit was instituted. The court said:

“The presumption exists that the officers and offices of a corporation are to be found at its principal place of business as defined by its recorded articles. * * *' The general law of incorporation of this State requires that the corporate articles shall fix and designate its principal place of business. * * A change in its name or its principal place of business may be made by amendment to its articles !! * * and such amendments are valid only when recorded, approved, and published as the original articles are required to -be. * * * We conclude, therefore, that under our statutes a domestic corporation * * may be sued: (1) In the county were its principal place of business is fixed by its articles of incorporation or amendments thereto; or (2) in a county where it maintains an office or agency for the transaction of business, and the subject matter of the action grows out of or is connected with the business of that office or agency.”

The same rule is followed in South Carolina. See Miller v. Boyle Const. Co., 198 S. C. 166 (17 S. E. [2d] 312), and Gibbes v. National Hospital Service, 202 S. C. 304 (24 S. E. [2d] 513). See, also, Hutcheson Manfg. Co. v. Chandler, 29 Ga. App. 726 (116 S. E. 849); United States Fidelity & Guaranty Co. v. Lawrence, 184 Gra. 83 (190 S. E. 346); Newnan Motors, Inc., v. Arrington, 194 Gra. 569 (22 S. E. [2d] 163); McHarg v. Commonwealth Finance Corp., 44 S. D. 144 (182 N. W. 705).

In State, ex rel. Juvenile Shoe Corp., v. Miller, supra, suit to enjoin the nse of a trade name was instituted in the county designated in def endant corporation’s charter to be its “location. ” The parties stipulated that in fact defendant had no agent, office, or officers in that county. The court said:

“It is a general and well-established principle of law that a corporation has a legal entity distinct from its members and must be a resident of some place. The statute requires that its residence be seated in the articles of agreement. * * * It was no doubt the purpose and intent of the legislature to make this requirement' of corporations for the purpose of determining jurisdiction of courts, and we must respect the reasonable intendments of the legislature in such matters. * * *

“We do not undertake to say in this case that relator could not be sued in Jasper county, * * * but we do think that under the provisions of our statute the object and purpose of the legislature in having such corporation designate where it is io be located was done in order to determine venue for the purpose of bringing actions against such corporation. ’ ’

To the same effect, see St. Charles Savings Bank v. Thompson & Gray Quarry Co. (Mo. 1919), 210 S. W. 868.

In our search we have been unable to find a single ease where it was held improper to bring a transitory action against a corporation in the county which it designates in its articles to be the location of its principal office, nor have any cases been cited to us which so hold. We found many cases, too numerous to cite, in' which it was held proper to sue a corpora tion in a county other than the one designated in its articles where it in fact had its office or was carrying on business, but we do not feel that such cases are authority for defendant’s position.

Our Court has never before been called upon to decide the precise issue present in this case. The closest we have come to doing so was in Detroit Transportation Co. v. Board of Assessors of Detroit, 91 Mich. 382, in which petition was made1 for a writ of mandamus to compel the respondent to remove a corporation’s name from an assessment roll. The facts were that the charter of the corporation fixed its residence in Hamtramck township, Wayne county, which at the time was outside the city of Detroit. The Court found that in fact the corporation resided in the city of Detroit, and said on page 390:

"For the purposes of this case the answer must be taken as true, and from that it appears that the only office for business which the relator has in this State is in the city of Detroit. The statement in its articles of association will undoubtedly estop relator to say that that is not its residence for certain purposes, such as filing chattel mortgages and service of process; but where it is apparent that the sole purpose is to avoid taxation, and that no office for business, within the meaning of the law, is kept at the place mentioned in its articles, the municipality where its real office for business is kept may assess and tax its personal property.” (Italics ours.)

It may be claimed that the italicized language is dictum in this case, but we believe it to be sound law.

The rule has been announced in Michigan that a private corporation resides in the place where its principal office is. People, ex rel. Detroit Fire & Marine Ins. Co., v. Saginaw Circidt Judge, 23 Mich. 492; Republic Motor Truck Co. v. Buda Company, 212 Mich. 55; Orloff v. Morehead Manfg. Co., 273

/ Mich. 62; Flewelling v. Prima Oil Co., 291 Midi. 281. In none of these eases was the contention made that a corporation is not a resident of the county designated in its articles of incorporation to be the location of its office.

Defendant attempts to draw an analogy between the last cited case, Flewelling v. Prima Oil Co., supra, and the present one. The cases are similar only in a superficial manner. There we merely held that the failure of the defendant corporation to maintain a registered office as required by the statute “did not subject it to service of process anywhere in the State.” The crux of the decision is found in the following paragraph on page 285:

“Plaintiffs elected to institute their action in Jackson county rather than the county of residence of the defendant corporation, and process could be served only in the county in which the suit was instituted. No valid service having been had in the county of Jackson on aiiy of the defendants, no authority existed for serving any of them in "Wayne county.”

No claim was made in that case that the defendant corporation was a resident of Jackson county, and there was, in fact, no basis on which such a claim could be predicated. In effect we held that in spite of the defendant’s failure to maintain its registered office, it was still a. resident of the county designated in its articles.

Appellees rely largely on Orloff v. Morehead Manfg. Co., 273 Mich. 62, but the case does not even "remotely resemble the present one. The main question therein was whether or not the subject matter of proceedings to dissolve a corporation is “local” in character. We held that it was, and that it was therefore improper for plaintiffs to institute such an action in a county other than the one in which the defendant corporation had its office and in which its property was located. There was no claim that the corporation resided in the county where suit was brought. Plaintiffs had brought the action in the county of their own residence on the erroneous theory that their cause of action was transitory in nature.

Since the instant suit is transitory in nature and was properly brought in Washtenaw county, the place of defendant’s de jure residence, service of process'therein could be made anywhere in Michigan under the statute (3 Comp. Laws 1929, § 14090 [Stat. Ann. § 27.757]). The service was, however, fatally defective in one respect. Service was made by a Washtenaw county deputy sheriff. We agree that such service is a nullity for the reasons assigned in Justice Sharpe’s opinion, and should have been quashed.

The trial court, however, went further and, in addition to quashing the service of process, dismissed the suit. This was improper. In Hellman v. Ladd, 315 Mich. 150, we recently held:

‘ ‘ The order of the circuit court not only quashed service of process that had been made on defendant * * * but it also dismisséd the bill of complaint as to that corporation. The sufficiency of the bill was not questioned, and the corporation’s motion to dismiss was directed solely to the proposition that it was not amenable to service in this State.

“The order entered is too broad and should be modified by limiting its language to the questions raised in the motion. ’ ’

In the instant case, the motion to dismiss was in the nature of a motion to quash service of process. The sufficiency of the declaration was not questioned, except on the question of res judicata. Respecting that point, defendant states in its brief:

“We do not wish to argue the point-as to res judicata for we realize that, although we claim that this cause is res judicata and that a valid covenant not to sue exists, nevertheless no evidence was presented on the point at the hearing below although the defense of res judicata is properly, raised on motion to dismiss, and the learned trial judge made no findings whatever in relation thereto.”

We do not pass on the question whether the cause is res judicata.

Under the authority of the cases hereinbefore cited, the trial court was in error in dismissing the suit, but was correct in quashing service of process.

The order dismissing the suit is reversed. The suit and garnishment proceedings are reinstated. The case is remanded and an alias summons may be issued in accordance with this opinion. Plaintiffs will recover costs.

Boyles, Beid, North, Dethmers, and Carr, JJ., concurred with Butzel, J.